Why You Absolutely Should Get a Department Store Credit Card

Why You Absolutely Should Get a Department Store Credit Card

Look, I know what you’re thinking: why do I HAVE to get a department store credit card?  That’s a great question and one that I grappled with for quite some time.  On one hand, I hate credit cards and avoid them at all costs unless it’s a true emergency.  My husband and I are huge fans of Dave Ramsey’s financial advice and I’m sure that he would take exception to the title of this post, but hear me out.

I’m certainly not an expert on financial matters, but I am an expert on maximizing savings at department stores.  And, like acquiring any skill, it takes practice and discipline.  Yes, I’ve honed the best skill ever because I get to shop while I do it.  I highly recommend it!

Before I get into exactly why I believe that a department store credit card is an absolute necessity, I believe I should do my duty and inform you of all the bad things surrounding them so at least you can make a more informed decision*.

The Bad

Generally speaking, department stores are smarter the you and me.  They don’t offer all the perks of a credit card out of the goodness of their hearts.  They make a TON of money off of people who do not pay off their balance every month – far above and beyond all the incentives that are offered.  They carry some of the highest interest rates out of any credit card out there.

Department store credit cards usually offer only low credit limits.  While low credit limits are not necessarily bad in and of themselves, it is something to take into account when looking at your credit as a whole.  If you do not have much available credit, opening a card with a low credit limit can hurt your score, especially if you carry a balance close to the limit.

Before applying for a credit card, it is important to understand that a credit inquiry alone can have a negative effect on your credit score.  Each individual inquiry will affect your credit score for 12 months, stay on your credit report for 24 months, and could drop your score between 10 and 30 points. If you have a very high credit score, opening one or two cards may not make any difference in your credit worthiness, but if you open multiple (like around the holidays, for example) your credit score can really take a beating.  If you plan on taking out a mortgage on a new home, refinancing your current home, or taking out a loan on a new car, opening a new credit card can have an adverse affect on the interest rate you get.  Therefore, don’t open a new card if you know you’re going to be doing any of those things within at least the next year and I would highly advise against opening more than one a year.

Lastly, the average age of your credit history is an important part of your credit score as it counts for about 15 percent of it. Again, if you have a well established credit history, one card may have very little affect, but it is still probably not wise to go open multiple accounts.

The Good

Now that I’ve gotten all the unpleasantries out of the way and assuming you’re still reading, let’s talk about why I believe you absolutely SHOULD have a department store credit card.

If you buy from a particular department store frequently and would benefit from all the coupons and extras that the card offers, then opening a store card is an absolute MUST (enter Macy’s, which gives you 20 percent off almost every time you use their card, plus dollar off coupons.  Cha-ching!).

If you have little or no credit history, then a store credit card is the answer for you.  They typically will extend credit to people with less than stellar or no credit before a major credit card company will.  AND the credit limit will be low so you can establish good habits without going off the deep end.

It doesn’t matter how high the interest rate is if you can pay your balance off in full every month.  This is the only way to go.  I preach never to leave the store with a balance.  Many, if not all, department stores will let you pay off your balance right at the cash register.  I often pay with my Macy’s card to get the discount and then immediately following the purchase transaction, I pay off the previous amount.  This way I can be sure I never have a balance on my card.  This takes EXTREME discipline.  If you cannot do this then DO NOT open a credit card.

If you are the type of person that can be disciplined enough to pay off your card immediately after your purchase then you must do yourself a favor and get a credit card from your favorite department store.  Mine happens to be Macy’s because combining the incentives and perks of the card with their One Day Sales has to be the best deal in retail.

What are your thoughts on department store credit cards?  Do you have one (or more)?  What has your experience been with them?  Leave a comment and let me know where you stand on the issue!

*Again, I am certainly not an expert on financial matters so please perform your own independent research before deciding whether to open a credit card.

6 thoughts on “Why You Absolutely Should Get a Department Store Credit Card

  1. Irish753

    Also the only time your credit takes a hit with a credit inquiry is if you don’t get the credit, loan, or whatever. I’ve seen people do this to themselves by changing their mind. Since the problems arose with identity theft this has changed somewhat and you are allowed to check your own credit without any repercussions (I believe it’s once a quarter) as this is frequently the only way to discover identity theft.

  2. Irish753

    I have at least a dozen credit cards and my credit score is over 800. Not sure where your getting the idea it hurts your credit. The key is you have to pay them off every month and not default.

    1. Fashion Finds on a Dime

      Thank you for chiming in on the issue! I went back and re-researched this point and while many sites discuss a somewhat significant ding to your credit for every new card you open, MyFico.com says the following:

      Fair Isaac’s research shows that opening several credit accounts in a short period of time represents greater credit risk. When the information on your credit report indicates that you have been applying for multiple new credit lines in a short period of time (as opposed to rate shopping for a single loan, your FICO score can be lower as a result.

      It goes on to say that just how much it affects your credit depends on the person. It’s the act of opening several cards in a short period of time that can affect your credit in the short term – not having several established credit cards open. If someone, like yourself, has a dozen credit cards that have been opened for awhile and you pay them off every month, then you would definitely build some great credit over the long term.

  3. Irish753

    I have a Nordstroms Visa and and an Amazon Visa, which I prefer over the Macy’s card because you can use them anywhere and you get rewards you can use at the respective merchants. Macy’s has fantastic deals even without the card plus when the do have special offers its seems as though virtually everything worthwhile scoring deals on is excluded. There’s no annual fees and as long as you pay the card off every month, no interest rate.

    1. Fashion Finds on a Dime Post author

      I’m so glad to know that about the Nordstrom Visa card. I don’t have one only because we don’t have a Nordstrom in Louisville (which is a major point of frustration/anger/sadness, but a different topic altogether). I agree that Macy’s does have fantastic deals even without the card, but from my experience, you get way better deals with the card. You usually get an additional 20% off when you use the card and are mailed additional ‘$10 off $30 or more’ and ‘$20 off $50’ or more coupons. Now, having said that, I will mention that I almost exclusively buy clearance items at Macy’s. Full price items are often excluded from coupons and/or the 20% off, but clearance items are always included.
      Thank you so much for your thoughts!

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